As I mentioned in a recent column, success begets failure.
Individual winners become complacent or drunk with power. Soon they lose an
ability to think of their complaining environment as anything but uninformed or
misinformed. They deserve greatness.

Hedge fund managers, dictators, CEOs, labor union bosses and
university administrators are all subject to this problem. Servant leadership
is too rare, and even Gandhi wasn't perfect. This is a fact I know from
experiential learning. A phrase from my youth has been haunting me for weeks:
"If you don't have anything positive to say, don't say anything at all." It
would take more discipline than I've got to be silent.

I was really looking forward to a settled 2011, with serious
people making progress on serious problems in a civil way. Then Tucson,
Tunisia, Egypt, Bahrain, Libya, Iran, Wisconsin, Syria, Ohio, Pfizer, Yemen and
Indiana happened. What's going on here? Is there an SNP, a biomarker, a common
cause to explain all of this?

A few people comfortable with their power have little
sympathy for the suffering majority who wish for a fair hearing and to not be
shut down or out. Taxpayers, students in the Middle East and research
scientists at Pfizer all have this complaint. Leadership, entrenched for
decades in many cases, can't seem to listen and embrace new ways.
Constituencies such as shareholders, citizens and elected officials play along
for a while. Then the tipping
point occurs. We're there.

Once the government employees got a better deal than the
unemployed taxpayers who paid them, demands for realignment and shared
sacrifice became inevitable. When so many work for the government, the
ever-smaller numbers supporting them with taxes see a lack of sustainability.
We're all shareholders of something.

I still have many friends at Pfizer (my surrogate marker for
Big Pharma as a whole), but far fewer than before. The announcement of closing
their Sandwich, England R&D center hit me like a ton of bricks. The way it
looks from the outside, two CEOs spent billions on acquisitions that have done
nothing for patients, nothing for shareholders and nothing for employees or
their communities.

I'm not buying that Skokie, Kalamazoo, Ann Arbor, St. Louis,
Groton, California and New Jersey would all have been in worse shape without
the help of Pfizer's planners. We have no way of knowing for sure. If all this
was to be a stimulus, it's clear it did not have a positive result for
employees or shareholders. A little more than a decade ago, the company was
suddenly too small, and the pipeline too empty. The ensuing financial
engineering didn't help. Now they are too big in the wrong places and more
heads must go. They hint that a good portion of products supporting their huge
sales should now be spun off. The previous leadership sure looks confused in
retrospect.

To be honest, I don't have an answer for them. They tried
something and it didn't work. So now it's on to try, try again.

It appears that the next, current and future try is vertical
disintegration. Pfizer, GSK, Merck, Johnson & Johnson and Lilly, among
others, have been playing this theme song for some time now. It's a matter of
breaking the ego system and embracing the life science and manufacturing
ecosystem.

Components include outsourcing much that is tactical to CROs
and CMOs and strategic to passionate small biotechnology firms and academics.
In the last three years, this has included moving captive facilities and people
into CROs and CMOs who can be recognized for success with lower net income than
expected for pharma.

In a way, "too big to fail" has become "too big to succeed"
from an R&D perspective, particularly for the "R" (or discovery) part.
Discovery risk is pushed out to smaller business elements. Many will fail. "De-risking"
is a new word. The tactical development stuff being pushed out to competent
contract partners accelerates a 20-year trend, not unlike what has long been
common for auto parts.

There is a renewed discovery opportunity for academics and
small firms, but they too are highly stressed; the universities by tax revenues
and the small firms by declining venture investing in the early stages. What
makes disintegration sensible is that it allows for flexible allocation of
people when projects or companies fail. It puts talent in smaller environments
where faster decision-making is a survival instinct.

A new jargon has developed around the terms open innovation,
virtual integration, FIPNet, precompetitive technologies, and the like. Slide
decks from strategists at major pharmas and their supporting consulting firms
are becoming highly repetitive. Deals are being announced weekly. Pharmas have
agreed to make unique animal models (or precompetitive technologies) available
to other firms. They have opened up their libraries to screening by outsiders,
and have opened up their screens to outside molecules and even whole libraries.
They've announced major deals with multiple universities and jointly funded
venture capital; trying yet again.

This new and refreshing openness to things "not invented
here" is a positive trend, and I'm rooting for it to work. It will if we don't
let planners get too frustrated by the unknown unknowns that define
biology.

Underneath all of this realignment, the innovation machine
is alive and kicking, but struggling a bit for funding. Government grants will
get even tighter and early stage venture capital is about as rare as flying
pigs. Nevertheless, while we're in the valley today, the really good stuff will
get sorted out and make it over the next mountain. In my next column, I plan to
take a look at a few topics with momentum that are changing the world of drug
discovery and development.

Peter T. Kissinger is a chemistry professor at Purdue University,
chairman emeritus of BASi and chairman of phlebotics and director of Prosolia
in Indianapolis.